June 14, 2011

Nokia enters into patent license agreement with Apple

After a long series of patent infringement lawsuits that began in 2009 and continued with many twists and turns along the way, Nokia has emerged the victor by signing a patent licensing agreement with Apple. The agreement will result in settlement of all patent litigation between the companies, including the withdrawal by Nokia and Apple of their respective complaints to the US International Trade Commission. This will certainly be the tech story of the day.

Nokia Press Release

According to Nokia's official Press Release, they have "signed a patent license agreement with Apple. The agreement will result in settlement of all patent litigation between the companies, including the withdrawal by Nokia and Apple of their respective complaints to the US International Trade Commission.

The financial structure of the agreement consists of a one-time payment payable by Apple and on-going royalties to be paid by Apple to Nokia for the term of the agreement. The specific terms of the contract are confidential.

"We are very pleased to have Apple join the growing number of Nokia licensees," said Stephen Elop, president and chief executive officer of Nokia. "This settlement demonstrates Nokia's industry leading patent portfolio and enables us to focus on further licensing opportunities in the mobile communications market."

During the last two decades, Nokia has invested approximately EUR 43 billion in research and development and built one of the wireless industry's strongest and broadest IPR portfolios, with over 10,000 patent families. Nokia is a world leader in the development of handheld device and mobile communications technologies, which is also demonstrated by Nokia's strong patent position.

This agreement is expected to have a positive financial impact on Nokia's recently revised outlook for the second quarter 2011 of around break-even non-IFRS operating margin for Devices & Services.

Nokia's victory will likely have a ripple effect in the industry, with Google being the next to reach a licensing deal with Nokia. You could be sure that Steve Balmer is smiling this morning, being that they entered into a strategic alliance with Nokia earlier this year. You win some, you lose some and life moves on. As of this moment, Apple has yet to officially respond to the licensing agreement. I'm sure that when they do, it'll be positive spin to be sure.

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Comments

A patent is referred to a set of rights granted to an individual or business by the state that gives them public disclosure of a new invention for a specific amount of time. This grant does not actually give the holder the exclusive right to practice the invention, but simply the right to preclude other outside parties from using or imitating it. Patent Litigation is a controversy or disagreement between two independent parties regarding a dispute of intellectual or physical property.

In reality, a cross-licensing deal would have been cheaper for Apple, since rarely does money exchange hands in such an arrangement. As long as Apple keeps innovating, and provided they deal with the several other rounds of patent infringement suits they are defendants in, they'll do just fine. Nokia has serious challenges well beyond this matter.

When I read your report on Hunting Down Infineon's Documents, it sounded like Apple may have been on the ropes. It'll be interesting to see how this unfold going forward and how Apple's own press release will twist this.

I certainly don't claim to know all the facts of the case, but I believe that the crux of the suits went like this:

Nokia: Hey, Apple dudes! Give us some money for our GSM patents; mmh, MORE money than everyone else pays - hell, you're a computer company, not a phone company! Come on, pay up and while you're at it, throw in all those new touch screeny patents you've been filing. Do it now or we'll crush ya, bokay?

Apple: No way dudes. We pay the same as everyone else or we pay nothing, and as for our patents, dream on!

Nokia: See ya in ITC court!

Apple: See ya then :)

Not so? So, how is this supposed to be a victory for Nokia and a fail for Apple?